The housing market is cyclical, moving up and down with the rest of the economy. Right now, it’s showing a new strength.
According to National Association of Realtor’s (NAR) housing affordability index, home affordability has reached the highest peak since 1970, which is when the data was first recorded.
What does this mean for you? The ratio between what you earn and what a new home would cost is to a point where you should be better able to afford to buy now than you have been since 1970. The housing affordability index is based on the relationship between median home price, median family income, and the average mortgage interest rate.
The index used to monitor this ratio rose to 206.1 in January. An index of 100 is defined as the point where a median-income household has exactly enough income to qualify for the purchase of a median-priced single-family home. This formula assumes the buyer will have a 20 percent down payment and 25 percent of their gross income available for mortgage principal and interest payments.
“This is the first time the housing affordability index has broken the two hundred mark, meaning the typical family has roughly double the income needed to purchase a median-priced home,” said Moe Veissi, NAR president.
There are many future predictions and no one, of course, knows exactly what the future holds. Some believe the housing market has stabilized and will remain steady for years to come, some believe it will get better, many fear another decline after the November elections. What we do know for sure is that declines have slowed, fewer homes are available for sale today on the retail market, and interest rates remain at all time lows.
If you are in the market to buy real estate, this report is good news. Are you planning to buy?